It’s not often that a company sells ~70 times as much product as its main competition. But according to an interview with VW brand chairman Herbert Diess, published on VW’s employee web magazine “Inside” and reported on by Reuters, that’s the case between Tesla and VW.

In the interview, Diess claims “in the old world [our competition] is Toyota, Hyundai, and the French carmakers. In the new world it is Tesla.” He goes on to state that the reason for this is because Tesla “has abilities that we currently do not have,” particularly in engineering.

When Tesla originally set up shop in the San Francisco Bay Area, many thought it would be impossible to do car manufacturing in an area with one of the highest costs of living in the world. After all, Toyota and GM had tried the same with the NUMMI plant, which had failed – and Tesla ended up purchasing the factory for pennies on the dollar when Toyota was trying to get it off of their hands.

But this decision may be the secret to Tesla’s product as well. Diess stated in the interview that one of the reasons Tesla is ahead is because roughly half of the engineers at Tesla are software experts. This has helped Tesla in numerous ways – with building their own in-car software system, over-the-air update capabilities, autonomous drive, and even backend software to help facilitate Tesla in setting up their own distribution network. By locating themselves in Silicon Valley, where the best software engineers in the world are available, Tesla has given themselves a critical advantage in this realm. No wonder so many other companies, including some new ones, are setting up shop in the area.

A few months ago, Diess signaled his confidence that “anything Tesla can do, we can surpass.” These comments seem a little softer than those – he seems to recognize that Tesla currently has an edge in technology. Tesla may not yet have the edge in scale of manufacturing and distribution, though they are ramping quickly and clearly planning for the future as gigafactory construction continues. But VW sees this as a necessity for themselves as well, recently stating that they see a need for 40 similarly-sized battery factories by 2025, if they are to meet their ambitious EV goals.

And so far, despite all this talk, VW has only released a few plug-in hybrids and one all-electric retrofit (the e-Golf). There arealotofconcepts on the drawing board, but as I’ve said many times, “you can’t drive a press release.” So far, none of these concepts have made it to final design, been priced, been manufactured, distributed, reviewed, test driven, or bought by anyone. So there are a lot of steps left before VW can back their talk with some walk.

Still, it’s good to see them seemingly taking this seriously, even if it has taken a long time for them to get here and will take even longer for them to get to production. It takes a long time to right a large ship, and VW is the largest ship around – with the highest volume of vehicle sales of any manufacturer in the world. So it’s quite telling that they consider Tesla as competition despite Tesla having just over 1% of VW’s yearly unit sales. This also somewhat legitimizes Tesla’s spot as one of the top carmakers in the US by market cap – if they’ve got the biggest carmaker in the world spooked, then clearly there’s something going for them.